Global Supply Chains – How Shocks in One Country Affect the World
Santiago Bel
October 26, 2025
When most people think of globalization, many think of trade, ships full of goods, international brands and products made “somewhere else.” But the deeper connection in the world economy today is not just in trade but in supply chains. The products that end up in your hands come from raw materials that many times cross multiple borders through several assembly processes before being completed. A single iPhone may depend on the Democratic Republic of Congo’s cobalt, Taiwan’s semiconductors, California’s design teams, and China’s final product assembly. However, when companies can make things quickly and cheaply, it makes the world economy fragile. When a gear stops working, it can create trouble for the whole chain.
The COVID-19 pandemic showed how fragile supply chains can be. At the start of 2020 when the pandemic started, many of the factories in China that were producing for products abroad were shut down. This brought the manufacturing of everything from computers to spare auto parts to a halt. Shortages arose around the world. Car makers in the U.S. suspended production due to supply shortage of semiconductors. Even medical supply chains struggled. The shortages of masks and gloves showed how reliant rich countries had become on Asian manufacturing. Shipping costs went through the roof. According to the United States International Trade Commission, in the first year of lockdown shipping container prices tripled.
It is important to understand that a supply chain is essentially a chain. Each link is a supplier, manufacturer or distributor that depends on another link. The system is efficient as long as everything is running smoothly. A weakness in supply chains comes from a tendency companies have which is to use a strategy called “just-in-time manufacturing.” This means supplying just enough to meet consumer demand, thus reducing waste and unnecessary costs. However, one malfunction in the chain and supply gets cut. This was reflected on a larger scale in 2021 when a cargo ship blocked the Suez Canal. For six days, the ship lodged sideways in a narrow waterway froze 12% of world trade. The effects of this one occasion lasted for months, raising prices and affecting billions in commerce.
Geopolitical tensions have added another layer of risk. The rivalry between the U.S. and China continues to affect global supply chains. With Trump’s tariffs, producers have shifted attention to other countries such as Vietnam, India, Mexico, and more for production.
At the same time, there have been attempts in the past to strengthen our supply chains by becoming more independent as a nation. In 2022 President Biden passed the “CHIPS and Science Act,” which allocated over $50 billion for domestic production of semiconductors, as there was a severe shortage at the time.
Semiconductors aren’t the only industry that have experienced disruptions and risks from supply chains before. In 2022, the Ukraine war disrupted food and energy markets across the world. Almost a third of the world’s wheat supply comes from Russia and Ukraine. Due to imposed sanctions on Russia, energy prices in Europe took off.
Because of these incidents, the old supply chain norm of “quick and cheap” is starting to shift into “efficient, secure, and resilient.” An example of this is “nearshoring.” This means instead of getting products or the parts needed to produce them from far away, people are starting to prioritize supply chains that are more convenient geographically. For example the U.S. is trying to encourage companies to switch their factories from China to Mexico or produce within the U.S. itself. Similarly, Japan is currently subsidizing companies that move production from China to Southeast Asia.
However, rebuilding supply chains is easier said than done. Building factories, training workers, and optimizing delivery routes can take years. This can lead to increased costs for both producers and consumers as logistics are smoothed out. According to the International Monetary Fund, economists predict full-scale “deglobalization” could lower global growth by around 5%.
Climate change is adding yet another challenge. Severe weather happens more often nowadays and gets in the way of farming. In 2021 floods in Germany and China damaged many factories and ship routes. In South America people didn't have enough food to eat. The environment is becoming more of a factor in supply chain planning because of this. Advanced technology predictions and rerouting may help with logistical issues but the challenge of complex parts is still an issue.
Technology might also reshape supply chains in other ways. Due to the advancements in automation and robotics, it appears that certain factories could easily relocate to the United States possibly without increases in costs. Small-scale, local production could replace goods that were before shipped from around the entire world. One thing that helps this potential shift is that the digital world can trace, transparently, the origin and destination of products, validating the honest sourcing of raw materials, in order to analyze how to develop new supply chains to be the most independent geographically that they could be.
The main argument in global supply chains is the perfect balance. How much efficiency should we sacrifice for resilience? How much independence can a country possess in today's contemporary society?
The U.S. would have to keep balance between both sides. The government is supporting domestic industries by spending money for a new generation of chipmaking and clean energy while they still need and rely on foreign for raw materials and intermediate goods to be able to complete the process overseas and to also make it cheaper. Diversifying their suppliers is a must for businesses, although that adjustment won't come without a time consuming process. The communication strike is causing people, or consumers to feel the effects from higher prices to longer time expected for a delivery.
The economy is vulnerable even though supply chains seem like an efficient system. Globalization won't be happening as much in the next few years, countries will start to realize that some countries aren't reliable sources for materials depending on what they want and what they are going to need for trade. In the world of today’s economy, there can be unexpected events that can bring advantages and disadvantages much faster.